What is special about the Amazon FBA service and what experiences do sellers have with it?
“My Amazon FBA Experience: I Sell with FBA and Earn €20,000 a Month! Now I Will Show You How to Build a Successful Business.” – You have likely read similar promising headlines from self-proclaimed Amazon gurus. But do these Amazon FBA testimonials reflect reality? Many who are involved in e-commerce or are considering starting their own online business on Amazon ask themselves whether Amazon FBA is worth it.
No one can deny that Amazon FBA offers many advantages for sellers. However, it is important to remain critical and be wary of exaggerated success stories that abound on the internet. What we can say upfront is: Yes, you can make money with Amazon FBA, but it requires a good amount of know-how and you need to consider certain aspects. From experience, Amazon FBA is by no means a “get rich quick overnight” model! With that in mind, we will show you the key advantages and disadvantages of Amazon FBA and what experiences other sellers have had with the fulfillment service. So, let’s get started, friends, and enjoy reading!
What is Amazon FBA and how does it work?
Amazon FBA (Fulfillment by Amazon) is a service where the seller can outsource all logistics such as storage, packaging, shipping, returns, and customer service. Amazon takes care of all this for you, for a fee, of course. Nevertheless, sellers can reach a much larger number of customers through automatic participation in the Prime program – and with less effort.
To start as an Amazon FBA seller, you first need to send the selected items you want to sell to one of Amazon’s fulfillment centers. This can be done through carriers of your choice, or you can have Amazon organize this process. In the next step, the products are listed, including the “Prime” logo. Now, the orders placed through Amazon are completely handled by Amazon. The picking from the warehouse, packaging in boxes, and shipping are all done exclusively by Amazon. If there are any issues with the orders, Amazon also takes care of customer service and the return of returned goods. Customers usually have a good experience with Amazon FBA, even if they may not be aware that their order was shipped using this service. The profit earned, minus all fees, is transferred by Amazon to the seller’s registered business account.
Is every seller and every product suitable for Amazon FBA?
Amazon FBA is generally open to all marketplace sellers (with a few exceptions). However, it should be noted that storage fees are based on the required storage space and duration. Especially for larger products, FBA can therefore impact the margin and even become unprofitable. Thus, products that represent a larger investment for the customer and are purchased less frequently may also be less attractive. In general, we recommend conducting a thorough and extensive product research to gain a clear picture of the situation or even to catch some trending products.
Additionally, Amazon’s guidelines indicate that products falling under the following four criteria may be excluded from the fulfillment program or may not be offered at all. This could dampen the Amazon FBA experience for some entrepreneurs.
Restricted Categories: This refers to categories such as food, which are monitored, controlled, and potentially regulated by Amazon. According to Amazon, this is to ensure customer safety, quality, any trademark rights, and compliance with legal requirements for import and export.
Products with Restrictions: This includes, for example, prescription medications, as these are legally excluded from sale. Additionally, nicotine-containing tobacco products or used vehicle parts are restricted by Amazon’s policies.
Hazardous Goods: Items with hazardous components that pose a health risk may not be sold on Amazon and, accordingly, cannot be distributed through Amazon FBA.
Improper Packaging: Packaging that does not comply with Amazon’s requirements can also lead to exclusion from the FBA program. In this context, Amazon emphasizes the need for safe and efficient packaging that is manageable in the fulfillment centers.
An alternative to Amazon FBA is dropshipping. Both shipping methods have their advantages and disadvantages. We have examined which fulfillment method is suitable for whom: Amazon FBA vs. Dropshipping.
The Most Significant Advantages: What Amazon FBA Sellers Report from Experience
Logistics Made Easy
If you have sold anything on the e-commerce platform before, you may know how tedious it is to search for the product in your home warehouse, package it, and then take it to the post office. Manual shipping is extremely time-consuming and labor-intensive. In contrast, sellers using Amazon FBA can leverage the experience and the personnel and material resources of the online giant.
Huge Storage Capacities Available
With Amazon FBA, you theoretically have unlimited storage capacity, as you can utilize Amazon’s gigantic fulfillment centers and do not need to invest in complex logistics. No more full garages where you lose track and have to shuffle things around. Say goodbye to space issues! You only pay for the space you actually use. The storage fee is based on the average daily inventory volume in cubic meters per month. There is also a distinction between the off-peak season (January to September) and the peak season (October to December). The peak season is slightly more expensive, but it is expected that you will also generate more revenue during this time. Amazon offers an official FBA calculator to provide sellers with more calculation security. Ultimately, it is not only important whether other Amazon sellers have had a good experience with FBA – the financial aspect must also be right!
Fulfillment by Amazon
By handling the shipping and having established contracts with major carriers like DHL, Hermes, and UPS over the years, Amazon has significantly reduced shipping costs. Additionally, Amazon offers a fast and cost-effective alternative to the aforementioned parcel delivery services with its own delivery service. For the customer, fast and reliable shipping provides an additional purchasing incentive for your product.
Management of Returns
Dealing with returns and upset customers can be tedious. For all FBA sellers, Amazon takes care of the unpleasant part, from inspecting the returned products to handling all subsequent tasks – you don’t have to worry about anything anymore.
However, a small fee is charged for processing returns, which is based on the amount of work involved. Typically, this fee is low and is therefore worthwhile for the seller. However, note that Amazon is generally very accommodating with FBA products and also accepts returns that you might not have accepted. You can find all important information about the Amazon A-to-Z Guarantee here: The Amazon A-to-Z Guarantee: Between Sales Genius and Return Madness.
Access to Premium Customer Service
Amazon provides customers with comprehensive customer service, which Amazon FBA sellers can thus delegate to the e-commerce giant. The customer service is active worldwide on behalf of FBA sellers 365 days a year and 24 hours a day. There is a direct messenger chat, email support, and a telephone service. Smaller sellers often cannot afford this on their own, as they lack the personnel resources or purchased teams are often too expensive. This significantly enhances the shopping experience for the customer, allowing you to differentiate yourself from competitors who prefer to handle their fulfillment themselves or have outsourced customer support.
Prime Status Increases Performance
One of the most significant advantages is that 70% of customers with Prime status shop on Amazon multiple times a week. In contrast, only about 27% of non-Prime customers visit Amazon as frequently. This is a considerable advantage for Amazon FBA sellers. Additionally, it is not uncommon for customers to filter by the “Fulfilled by Amazon” status – thus significantly increasing the visibility of FBA products. While there is also a possibility for sellers without FBA to sell with Prime status, they must first qualify and prove that they can meet the high logistics standards. This is often not feasible for many smaller sellers.
The Most Significant Disadvantages: What Amazon FBA Sellers Report from Experience
As positive as the advantages for Amazon sellers may be, you also need to weigh some disadvantages of the Amazon FBA offering. However, the extent of the barrier for sellers can vary significantly from case to case.
Advertising is only possible to a limited extent.
While advertising on the marketplace itself is not a problem, using individual shipping boxes or including flyers and similar items is not permitted. Amazon FBA products are shipped in packaging with the Amazon logo, which does not allow for any conclusions to be drawn about the actual sellers. This effectively prevents any communication with the customer – including promotional materials. Each seller must decide for themselves whether they want to obscure their own brand communication and take full advantage of Amazon’s brand power, or if a heightened brand awareness among their customers is more important to them.
Too High Costs
Experience has shown that with Amazon FBA, costs can be seen as an advantage, but they can also represent a significant disadvantage for the seller, as they must be considered in relation to the profit margin (this should always be done). If the sales of the product are very low and the logistics costs are too high, there will be nothing left at the end. Amazon FBA sellers often just dive in. The problem for many sellers is that they have not properly calculated costs such as FBA fees, storage and packaging costs, and later costs for reorders. Therefore, sufficient startup capital should be available to address any potential issues.
Amazon FBA: Experience shows that the competition is immense!
Building your own business in online retail is relatively complex compared to Amazon FBA. However, an FBA business is no walk in the park either, as sellers are subjected to the stringent demands of the Bezos corporation. The initial excitement has faded, and most people realize that it takes a lot of work and some expertise to earn money long-term with Amazon FBA.
On one hand, the increasing competition settling on the marketplace is one of the challenges for FBA sellers. Additionally, Amazon, as a superpower, actively participates as a seller itself. Furthermore, a large portion of the offered branded goods is now sold by multiple sellers, leading to rising competitive pressure. Consequently, it has become increasingly difficult to acquire the so-called Buy Box, even with Amazon FBA, based on experience.
Let’s be clear: Is Amazon FBA still worth it?
Now you have all the relevant information on this topic. However, one question remains: Is Amazon FBA worth it for you or not? Most companies and specialists answer this question with an enthusiastic “Yes, of course!”
The correct answer is more likely: “It depends.”
If you sell on Amazon full-time, you will not be able to avoid using FBA. The time savings alone and the increased chances of winning the Buy Box for those selling branded goods clearly advocate for the use of Fulfillment by Amazon. But how can you get the most out of this concept?
At the end of the day, it doesn’t matter whether you sell branded goods or your own brand. The fact remains that it is extremely difficult nowadays to find a new product that is not already being sold on Amazon. There are simply many people selling all kinds of products and specializing in every conceivable niche. On the other hand, there have never been as many online shoppers as there are today. And here’s the catch: all these potential customers are looking for the same thing. Namely, a good product accompanied by a perfectly seamless customer experience.
The keyword here is “customer experience.”
A flawless product is practically a basic requirement. However, the perfect customer experience – beautifully referred to in English as the “Customer Journey” – is not so common and remains just as memorable as the quality of the product.
Sure, with Amazon FBA, you lose the opportunity to have direct contact with your customers, as Amazon takes care of that for you. However, you can use the time gained from this to work on your listing. For example, you can have high-quality photos taken of your products, improve your product descriptions, or refine your pricing strategy. Especially on a huge platform like Amazon, it is ultimately the unique selling points that encourage purchases.
So, is Amazon FBA worth it for you? It depends. How can you prove to customers that your shop is better than the competition? Do you have the better price? Are you selling an extremely practical bundle? Are your images simply more attractive than those of the competition and do they convey the feeling that the product transfers to the person just by scrolling on a smartphone?
Well-executed, these are exactly the factors that make Amazon FBA worthwhile. Those who sell mediocre products without FBA will, even with Amazon FBA, experience continued mediocre sales.
The Problem with FBA Errors
Amazon also makes mistakes during fulfillment. FBA errors are difficult to identify manually or require a very high effort. Based on experience, FBA sellers on Amazon often forfeit a lot of money if they do not claim their entitled refunds. Typically, there is a lack of knowledge and the necessary time to manually analyze every small detail, compile the necessary reports, and interpret errors. SELLERLOGIC makes FBA errors visible and assists you in preparing the data, documenting the cases, and the tedious communication with Amazon. Now take advantage of the unique tool: SELLERLOGIC Lost & Found.
Conclusion: Amazon FBA – Experiences from Users of the Program
Amazon FBA sellers receive several exclusive advantages over other marketplace sellers, such as significant ease of work, fast and smooth shipping through Amazon’s fulfillment centers, and associated cost savings, as there are no rental or potential construction costs for a personal warehouse. This allows for the establishment of an e-commerce business with relatively low startup capital.
However, there are also some disadvantages that come with Amazon FBA based on experience. The seller loses the ability to directly interact with customers by transferring all fulfillment to Amazon. Additionally, mistakes can occur on Amazon’s part, and sellers who do not manage their refunds may unknowingly lose a significant amount of money.
Experience has shown, however, that with good preparation, particularly through accurate calculation of incurred costs and weighing opportunities and risks, nothing stands in the way of a profitable and successful Amazon FBA business, and high profits can be achieved. Every seller has had bad experiences with Amazon FBA, as can be read in many forum posts. The motto here is to “keep a cool head.”
Image credits in the order of the images: © Mike Mareen – stock.adobe.com / Screenshot @ Amazon / © photoschmidt – stock.adobe.com / © Mike Mareen – stock.adobe.com
